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Why Customer Experience (CX) is at the core of Digital Transformation of Retirement Systems?

Retirement Plan Providers need to ensure that the plan sponsors, who are their direct customers, as well as plan participants in the B2B2C ecosystem, have everything they need at the click of a mouse.

Businesses across industry segments are undergoing a process of digital transformation as technology solutions enable ‘ease of operations’ while also playing a role in increasing efficiency and improving customer experience (CX). The global digital transformation in banking, financial services, and insurance sector is expected to reach USD 121.70 billion by 2025, up from USD 29.97 billion in 2018 according to a report by Adroit Market Research. Technologies such as mobility, cloud, Internet of Things, Machine Learning/Artificial Intelligence and Blockchain ease up operations across functions, from internal business processes to customer service.

The retirement technology systems segment is no different. It is facing several challenges which is further compounded by the current dependence on paperwork and legacy systems. A US Department of Health and Human Services report estimates that, by 2040, nearly 21.7 percent of the US population would be aged over 65. While on the one hand funding levels are dropping fast, investment returns are tenuous. The cost of administration and need for compliance are on the rise. Retirement Plan providers are compelled to think of ways to improve service while encouraging customers to sign up and contribute more for retirement plans. They need to be able to offer a client-facing portal that enables the customers to assess their cash flow and progress in meeting self-defined goals, on the basis of accurate data. Digital transformation – with a range of digital-first services – is emerging to be the primary solution that can enable this.

Module-based approach to Cloud Solutions

Cloud is the most popular transformation technology, contributing nearly 50 percent of the digital transformation revenue across segments. Cloud provides large farms of computing power at lower costs of ownership as well as maintenance. Traditionally, Retirement Plan providers maintained their own Mainframe servers that are expensive to own. Secondly, the codes written for these servers were monolithic, making it difficult to change as needed whenever a new product or service is introduced, or when new regulations are introduced. This delays the process of changeover and adds to costs. Being on the cloud and adopting a modular approach using APIs/integration helps in addressing specific change requirements easily and quickly.

Machine Learning/Artificial Intelligence

Machine learning and artificial intelligence solutions are enabling organizations to understand their processes to service their customers better and introduce operational efficiencies. While reducing operational costs, it can increase revenues because of better productivity and improved user experiences. It also improves compliance and reinforces security. All it needs is historical data that provides insights and reveals patterns.

However, while initial proof-of-concept and pilots are underway for the retirement services sector, it is bogged down by the challenge of having to deal with multiple instances of the same information. Data is not clean and consistent, needing validation, thereby undermining the efforts to learn from historical data.

Congruent Solutions, a specialized player in offering retirement outsourcing and retirement administration services using technology, is piloting a Machine Learning based data validation feature in its CORE suite of product with historical data. This will improve the quality of data analytics and thereby the ability of the organization to respond to requirements across functions, and even improve cross-functional collaboration.

Once data validation is done and the training algorithm is set, AI-based digital products can transform end-customer experience.

Mobile Enabled

Retirement Plan Providers cater mostly to the Baby Boomers who still need physical documents to feel comfortable about the transactions. On the other hand, millennial generation has also entered the workforce and become a part of the system. They want information on their mobiles. Therefore, while the impact of mobile technology has not been as significant in this industry, particularly because of the long term nature of the investments, technology solution providers such as Congruent are becoming mobile ready so that they can help their clients serve the entire customer set – across age brackets.

Blockchain for Revamping Infrastructure

The World Economic Forum estimates worldwide pension savings gap to increase at the rate of five percent per year from US $70 trillion in 2015 to US $400 trillion by 2050, nearly five times the global GDP leading to a highly skewed, high-cost, mismanaged pension system that will result in deficit. In the US too, only about 55 percent are covered by retirement solutions.

With social security scheme expected to become bankrupt by mid-2030 according to the research report from MarketWatch, a Dow Jones subsidiary and financial information website, and plans like 401K are expected to become expensive to run, therefore, alternative solutions such as Individual Retirement Account (IRA) and Multiple Employer Plans (MEPs) are becoming important.

Implementation of blockchain based pension systems can address these challenges by enabling transparency and safe and easy transfers of user profiles.

Though the technology is still in its early stages of implementation in the retirement segment, the chain of transactions in this industry is a right fit for blockchain. This will be a game-changer sooner or later.

With the adoption of digital transformation technologies, the way individuals opt for Retirement Plans to secure their future may change. Even the self-employed and the underemployed may be able to choose plans that suit their pockets and fuel their dreams. Digital transformation can not only change the way businesses are run but also create new avenues for expanding market reach and improving customer service.

Congruent, which has over 25 years of experience servicing this industry, has the expertise and experience to cater to the changing needs of this industry. Its CORE suite of products is available for installation on-premises and on cloud, and is modular and provides cost-effective software and back office administration services to the retirement industry. Its service experience and knowledge extends across the entire spectrum of Defined Contribution (DC) retirement plans. In delivering these services, security is at the core of Congruent’s operating philosophy and the company’s security practices are in line with the best in the industry.

More importantly, Congruent has the ability to both ‘modernize’ and ‘transform’ the retirement systems segment; while transformation involves the process of new digital services (like chatbots or mobile apps), modernization involves the process of upgrading existing software, infrastructure and legacy systems. Our approach over the years has been about balancing these two areas seamlessly for a client.